Ladies and gentlemen, thank you for standing by, and welcome to the Aurora Mobile Third Quarter 2021 Earnings Conference Call. At this time, all participants will are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your host today, Mr. Rene Vanguestaine. Thank you. Please go ahead, sir..

Thank you, Annie. Hello, everyone, and thank you for joining us today. Aurora's earnings release was distributed earlier today and is available on the IR website at ir.jiguang.cn. On the call today are Mr. Weidong Luo, Chairman and Chief Executive Officer; Mr. Fei Chen, President; and Mr. Shan-Nen Bong, Chief Financial Officer.

Following their prepared remarks, all three will be available to answer your questions during the Q&A session that will follow. Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, and as defined in the U.S.

Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions which are difficult to predict and may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

Further information regarding these and other risks, uncertainties and/or factors are included in the Company's filings with the U.S. Securities and Exchange Commission.

The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. With that, I will now turn the conference over to Mr. Luo. Please go ahead..

Thanks, Rene. Good morning and good evening to everyone on the call. Welcome to Aurora Mobile's first quarter 2021 earnings call. This is the third quarter where we have been operating under the pure SAAS business model since the beginning of 2021.

We continue to see great business growth in the SAAS business, and I will go straight into our quarterly results and share with you our business progress and key business metrics in the third quarter of 2021.

Before I comment on our Q3 results, I would like to remind everyone that the quarterly earnings deck is available on our IR website for your reference. You may refer to the deck as we proceed with the call today. Let's begin our review with highlights of our key operating and financial performance for the third quarter of 2021.

As a reminder, we completely exited Targeted Marketing at the end of 2020, and our business is now 100% focused on Subscription model, which include Developer Services and Vertical Applications. For apple-to-apple comparison, numbers presented exclude contribution from the legacy Targeted Marketing in the full year.

In the first quarter, we have seen a steady and solid upward trend in our SAAS business, which is a result of our dedicated effort in building and growing them. Here is a summary of the solid results for 2021. The number of paying customers increased to 2,729 from 2,320 a year ago, up 18% year-over-year.

Revenues were RMB19.5 million up 48% year-over-year. Group gross margin was 74.4%, which is more than 1.5x compared with 47% from a year ago. Gross profit was RMB57.4 million up 48% year-over-year, and adjusted EBITDA was negative RMB16.1 million, a substantial improvement of 27% from a year ago, demonstrating our strong operating leverage.

Total deferred revenue was up RMB100 million for six consecutive quarters, indicating strength in suites growth. AR days continued to decrease to 39 days, indicating our disciplined credit granting and out the majority of quality customers paying on time.

Revenues from our SAAS business set another quarterly record high with 48% growth in Development Services and 18% in Vertical Applications on a year-over-year basis. Our group margin has greatly improved from 47% a year ago to 74.4%, which was the result of our successful transition into the pure SAAS business model since the beginning of 2021.

The strong gross profit growth of our SAAS business was mainly driven by revenue growth of 38% year-over-year. The backbone of our continuous revenue growth has been our relentless team effort and prioritization of innovation in developer services’ products.

We always strive to provide solutions that exceed our customers' needs and requirements for continuous develop feedback iterations. In this quarter, we are proud to share recent updates with you and innovations across various product lines.

Our product development [indiscernible] also has always been to introduce rightly upgrade up of products and those scalable and suitable for all industries.

Then based on the needs and feedback from each specific industry vertical, we move on to address and offer solutions and services that can meet specialty requirements of each user base in our target market. For example, how do we go deeper to raise customers' participation and fulfill their needs.

Many of our development efforts in recent cultures have been focused on creating deeper customer engagement.

In Q3, we launched a free version of our core JPush product, featuring a brand-new upgrade to the HUB function whereby mobile app developers can easily integrate the seven major mobile phone manufacturers and operating systems push channels into the app, including but not limited to channels such as Huawei, Xiaomi, Oppo, Vivo and Meizu.

For this HUB function, we are able to have mobile app developers significantly increase the overall notification delivery rate by 80% compared to those mobile apps who do not use this HUB function, which sequentially improved the prepay of their apps.

Mobile app developers no longer had to integrate each manufacturer and operating systems channel on there on. By using our HUB function, they can easily integrate all of these seven major notification channels and manage all of the push message on our G1 platform in one go. As of today, over 7,000 apps have already started using this new function.

Over 35% of the new apps that use our JPush SDK have already integrated this function into their apps.

This HUB function marks a new milestone of helping developers greatly improve their push results with very simple and efficient integration steps and cements our position as the leading push notification provider in China As one of several newly introduced products in 2021, our VAAS product has generated much customer interest.

With the growing demands in the short video industry, we can notice that some industry verticals can be evolved over the past few years and become even more dependent on the product range and scope of VAAS service.

During the quarter, one of the most renowned manufacturers in the smartphone industry started testing our VAAS products on their smartphone appliance intended for wider rollout in the near future.

As more and more screens displays become integrated into the smartphone update appliance and devices, bringing out the right content on these screens has quickly become -- made a way of keeping users engaged and integrate better user experience.

By providing short videos that are tailored, customized and geared towards different user groups, and displayed on different appliances. Our VAAS product continues to satisfy customers' requirements and increase user stickiness and user retention time. We believe that our VAAS product has vast market potential and applications going forward.

In addition, we have recently launched our on-demand video cloud [indiscernible] service under the VAAS product lines. This new service provider provides app developers an opportunity to quickly integrate their app with video function.

Whilst they have implemented our on-demand video culture service into their apps, developers can enjoy the freedom and convenience to perform a streamline of actions, including upload, review and create, manage and play the videos on their own apps.

Each service fundamentally eliminates the [indiscernible] process for those developers who want to manage their own videos on their apps. Within the short release period in Q3, we have already seen great customer interest and receive the many inquiries about this product.

We have observed that based on-demand video cloud service has added great value to app developers and is part of our product development strategy to go deeper and to satisfy customers' specialty requirements and needs. By doing so, we can develop closer ties with our customers and become their long-term trust partners.

Last finally, another very exciting new step I want to share with you is that on November 17, our JVerification and other customized face officially launched on HUAWEI CLOUD. The cooperation with HUAWEI CLOUD demonstrates the industry-wide acclaim and trust we command for our robust technical capabilities and services.

Currently, developers can easily purchase and experience our JVerification service by simply logging into a HUAWEI CLOUD account.

In addition to JVerification, developers can also gain access to JIGUANG's customized service package on HUAWEI CLOUD, which include push notifications, instant messaging, traffic monetization JIGUANG Alliance, JIGUANG VaaS, and UMS and the other products that help developers operate, grow, and monetize their applications.

We believe that this cooperation with HUAWEI CLOUD can benefit us by reaching out to more potential fee-paying customers and will bring possible results in the near future. In fact, we have already signed a number of paying customers since these alliances started.

Now, I will turn the call to Fei, who will discuss the Q3 performance in greater detail..

Thanks, [Chris]. Let me start the discussion on different revenue streams within the SAAS businesses. In third quarter '21, revenues from Developer Services reached RMB64.7 million, a robust 48% growth on a year-over-year basis.

The year-on-year revenue growth was a result of strong growth of 32% in Subscription services and a very impressive 84% growth in value-added services. Subscription Services revenues were RMB39.8 million, an increase of 32% year-over-year, primarily driven by the new customer acquisition.

Apart from new customer acquisition, our continuous efforts in cross-selling various non-push subscription products such as JVerification, JSMS, JAnalytics have increased our customer subscription uptick via multiple product lines. As a result, our revenue contribution of non-push notification products increased to 43% from 31% a year ago.

Non-push notification products also achieved a higher ARPU of RMB37,000, resulting in the overall ARPU for subscription services increasing by 13% to RMB16,600 and compared with RMB14,700 a year ago. New and renewed contracts of notable customers in the quarter include NetEase News, China Southern Power Grid company, Starbucks, McDonald's and so on.

Value-added services within developer services, which includes revenues from JG Alliance services and the advertisement SAAS achieved outstanding results where revenues grew significantly by 84% year-on-year to RMB24.9 million from RMB13.5 million in third quarter 2020.

The demand for our JG Alliance products has proven to be continuously strong since its introduction to the market. We expect this strong demand trend to continue into the future.

On the supply side of JG Alliance, during the quarter, we continued to grow this traffic pool as it is a vital part of our strategy to increase opportunities for monetization channels. The total number of apps within our network exceeded 390 apps compared to 344 in second quarter 2021, representing a 15% growth quarter-over-quarter.

The total DAU within the network has stabilized at RMB180 million, same as the second quarter. As discussed in the last earnings call, there has been some delay in developers joining our alliance network and integrating our SDK due to the regulatory requirements that became their top focus during the quarter.

However, we are seeing the ramp-up of this integration period during the fourth quarter, which lays a solid foundation on the supply side of the equation and it can, in turn, help us achieve a strong sequential revenue growth for the coming quarters.

On the demand side, mini program developers and app retargeting related demand continue to play a pivotal role by contributing to the majority of our JG Alliance revenues in third quarter 2021. During the quarter, other agencies contributed more than 50% of JG Alliance revenue stream while the rest came from direct customers.

Major customers of JG Alliance consisted of repeat customers and market leaders across many industry verticals. They include, but not limited to Weibo, Maotai, JD, Alipay, Taobao, Biadu, Vipshop and TravelGo. Now let's move on to Vertical Applications that cover Financial Risk Management, Market Intelligence and iZone products.

These revenues grew steadily by 18% year-over-year with the lion's share of the growth coming from the Financial Risk Management business. In the Financial Risk Management segment, revenues increased substantially by 35% year-over-year with the help of the 37% growth in ARPU.

This quarter, we had another remarkable quarter with the highest revenues since the beginning of COVID-19 in first quarter of 2020. The strong demand for our Financial Risk Management products has paved the way for us to acquire new customers and retain mainly existing customers each quarter.

New and renewed customers include [Taikang] Insurance, [indiscernible] [Ducham] Financial 300 digit tech.

Our Market Intelligence product line recorded a slight 3% dip in revenue year-over-year due to the lackluster China ADI investment environment in third quarter 2021 as many investors pulled out such China ADI investment due to regulatory concerns.

Nevertheless, we expect the demand for this product line to recover in current quarter and the quarter going forward. During third quarter 2021, we have signed renewed contracts with many large customers include Himalaya, NetEase Media, Ali Entertainment, et cetera.

And lastly, our iZone business has delivered a modest 5% revenue growth year-over-year. With that, I'll pass the call over to Shan-Nen..

revenue of our SAAS businesses increased significantly by 38%. Group gross margin improved from 47% to 74.4%, a direct result of Q3 2021 gross margin being 100% contributed by high-margin SAAS businesses. Operating expenses however, increased by only 6%.

As a result, our adjusted EBITDA improved by 27%, which continues to demonstrate the scalability of our business model. And this is the third quarter where we have delivered SAAS business for new results, and we are very pleased with the results we have achieved.

We believe that the growth momentum of Q1, Q2 and Q3 this year will continue to bring more strong results in the coming quarters. Next on to the balance sheet. I'll start with two very important KPIs that we closely monitor. Firstly, the AR turnover days decreased from 45 days in Q3 2020 to 39 days in this quarter.

This was similar to the trend we have seen last quarter, due to both the shift away from the legacy Targeted Marketing business to focus on SAAS businesses and the disciplined credit granting policy and our focus on improving AR collection. Secondly, the total deferred revenue balance which represents cash collected in the banks from customers.

For a sixth consecutive quarter has exceeded RMB100 million at quarter end. As of September 30, 2021, the balance was at RMB119 million, up from RMB111.5 million in Q2 this year. Next, total assets were at RMB627 million as of September 30 in 2021. This includes cash and cash equivalent of RMB281 million.

Accounts receivable of RMB41 million, prepayments of RMB13 million, fixed assets of RMB68.9 million long-term investment of RMB165.6 million. Total current liabilities were at RMB373.1 million as of September 30, 2021.

This includes short-term loan of RMB105 million, accounts payable of RMB13.5 million, deferred revenue of RMB114.4 million, accrued liabilities of RMB95.1 million. Next on to business outlook.

Based on the current available information, the Company sees full year 2021 revenue guidance to be in the range of RMB350 million to RMB360 million, representing growth of 36% to 40% year-over-year compared with last year and our guidance for our full year gross margin to remain above 70%.

Please note that for meaningful comparison purposes, the prior year revenue numbers used to calculate the growth percentage exclude revenue from the Targeted Marketing business.

The growth outlook is based on the current market conditions and reflects the Company's current and preliminary estimate of the market and operating conditions and customer demand, which are all subject to changes. Lastly, before I conclude, I'll give a quick update on the share repurchase plan.

In the quarter ended September 30, 2021, we did not repurchase any shares. As of September 30, 2021, cumulatively, we have repurchased a total of 921,000 ADS since the start of our repurchase program. And this concludes the management's prepared remarks. We're happy to take your questions now. Rene, back to you..

Operator, please start the Q&A..

Thank you. [Operator Instructions] Our first question is from the line Brian Kinstlinger of Alliance Global Partners. Please go ahead..

First, can you comment on the pace of JG Alliance integrations? Has the pace picked up to the same pace prior to the discussions of new regulations? Or is there going to be a gradual pickup and you still have a bit more to go before the pace returns to that rapid pace?.

Brian, this is Fei. So in terms of the apps, the pipeline to join the JG Alliance, right? So, we do see actually starting from the end of third quarter, beginning of the fourth quarter, many apps before they were delayed in the process, has renewed the process started engaging with us. So we actually currently are seeing a pretty decent pipeline.

It will be a very strong pipeline, not only some medium-sized apps but also some large, very large apps who are in the discussion with us. So we do expect there's a decent number of DAUs going to be joined or joining our network in current quarter.

So, because of this situation, this outlook that's why we give this confidence that we will be able to narrow our guidance range for the revenue, as you have seen, right? We've narrowed to the upper end. So that shows the confidence and the visibility we currently have..

Maybe just a follow-up on that.

Is the pace fully recovered or is it partially recovered and you still have more to go as those apps improve their regulatory situation for their own apps?.

I think that it will be -- most of it has recovered. Yes, I would say 70%, 80%..

Okay. And then in terms of JG Alliance.

Talk about the mix of direct sales versus publishers? And how you kind of rank these and CDs going forward as growth drivers?.

I think that the growth driver -- because actually the demand is always there and the demand for our product -- actually that's not a bottleneck as I previously shared with you this commentary in previous calls. Actually, the bottleneck is always -- has always been on the supply side.

So as long as there are more apps joining more DAUs joining our network, we will be able to offer more impression, more exposure to the customers on the demand side, right? So that's the situation I want to emphasize again..

Okay.

And lastly, can you talk about the early adoption trends with JG Video-as-a-Service product since launch? And how do you expect this to impact revenues over the near and long term? And then in terms of that, maybe go through the sales cycle, how long will respective customers maybe test this product before purchasing?.

Yes.

So in terms of JG VAAS products, right? So actually, since this launch, we are continuing to educate and explore the market, and we have discovered that demand actually is coming from a very diversified industry verticals, such as the financial institutions, the security houses, right, local services transportation, entertainment, many industry verticals, the customers -- the app developers in those verticals expressed strong interest which as you have read the press release, right, we recently successfully signed up the contract with a leading IoT manufacturing in China.

This is a very big contract, okay, close to RMB1 million versus traditionally, actually, the ARPU for this product is about 100,000, right? So initially, for the video content, we appear on this IoT user's mobile app. And then you will appear on the smart devices.

Think about the user case when you wake up in the morning, go to the kitchen and start preparing your breakfast, when you are cooking the big screen on your refrigerator will start showing your favorite short videos. So isn't this going to be going to make your cooking more fun? All this is possible is because it is powered by JG VAAS.

So we think that this is what's going to happen in the future, and we think it's really exciting. I think the adoption across multiple industries are going to happen not overnight, but we do see the trend, actually, the demand is there..

So in the short term, there'll be a very small contributor to revenue.

But as we look to maybe the second half of 2022, does it become a catalyst to revenue growth? Or is that even too soon?.

That's what we are aiming to. Yes, you are correct.

In the short term, the revenue contribution is still relatively small, given our -- the large base of our traditional products, the push services and the other related SDK tools, right? But for next year, actually, we aim to have the sales force and to have -- to drive strongly to promote to sell this product.

So certainly, there will be our key focus for next year for this VAAS product as well as the UMS product is two new products..

We have our next question from the line of Ryan Roberts of Navis Capital. Please go ahead. Your line is open..

So my question is really kind of more on the, I guess, the financial performance. So first question kind of on gross margin for SAAS, I know it moves around a little bit from kind of from quarter-to-quarter. It looks like it's softened a little in this quarter.

And so I was kind of curious if you can give us some color on why that might have been? And I've got a question about kind of the outlook after that?.

Yes. I guess the margins did not move as much as what we have expected, this drop a bit, but I guess there's a more functionality on some of the apps that we brought in for the J alliance we Yes, we managed to get more than some of the share of revenue. So in that case, we are giving them some of the benefits of our gross margin.

So we do not expect that to be a continuous trend. So we expect the margin to be above 17% nevertheless. So as far as the margin is concerned, we don't see that as a meaningful dip..

Yes. So we aim to keep our gross margin above 17% at least that's our near-term target..

Got you. Got you. Okay. And then that sounds kind of like, I guess, a base case. I think in the past several quarters, It's been certainly well above that. So that's, I guess, how I'm looking at that.

And really kind of -- as we sit here now in November, looking into, I guess, really, actually, we're almost in December here, how are we thinking about next year? Because it sounds like you have JG Alliance devices coming back into the pool, the previous analyst asked about sign-ups in kind of you mentioned that you're back on to a normalized pace, which I realized there are vagaries there with what developers want to do or not.

But how are we thinking about the year ahead? And maybe on JG Alliance, can you update us on kind of the overall ad load as you go into the end of the year and also ECPM.

How are those metrics kind of shaping up?.

Yes.

So Ryan -- so actually our teams, different business units currently are still undertaking the process to finalize the next year's budget, right? So we usually have used two approach bottom up and top down, okay? So the management -- the top management people sitting here have a goal we want to achieve for next year, right? But also, we need to look at how the people in the field, they look at their confidence level and what they see in terms of the demand and the macro environment, et cetera.

So we need to take everything into consideration and then come up set a go for different business units, and then we come up the guidance for the entire company, right? So currently, we are still in the process of doing this. So I think by next earnings call, we should be able to give you confidently a concrete number of what we are going to achieve.

And then in terms of -- yes, the ad load, right? So ad load actually is actually determined by a number of factors.

One is we talked about this a number of times, basically the product called the SSP 2.0, which allows -- enables the models for the , right? So actually talk about this product actually in the third quarter, it continued its product iteration. We made some progress in the third quarter, which actually helped improve our ad load a little bit.

The next magnitude is not used to as a section. Currently, the improvement is less than 10% overall.

And the progress of the transition is a little bit lower than we expected, and we expect the full migration of existing apps into SSP 2.0 will be delayed to the first quarter 2022 because not only the product needs to be robust enough but also we need the sales force and app traffic operating team working together to identify each app usage scenario that is suitable for multiple exposure.

For example, we need to determine when a user enters what page and conduct watch action then it is appropriate to send another in-app message, right? So after such information has been analyzed, we need to have the conversation with the developers one by one to tell them this is how we think about it and why they should add this functionality.

And all this actually takes time. So our goal is to have the add exposure from this perspective to improve by close to 20% overall by end of third quarter. And other than this SSP 2.0, the improvement, which will improve the ad load.

Actually, there are other ways we can improve the ad load as well, such as we are making technical improvements and which can give us more chances to display. For example, we are storing some backup as if the first impression doesn't work, doesn't happen and then the backup a can show up, which will certainly help improve the ad load.

And this is a technical improvement. And also, we are identifying and eliminating some unnecessary loss opportunities in displaying the ad due to certain rule setting. So there are multiple things we are currently undertaking to try to improve the ad load. So I think if one or two of these things we do well.

I think the ad load will continue to see upward trend. So in terms of the -- what's the question you asked? That's a third question.

The other question was on ECPM..

ECPM in the quarter actually remained stable during the quarter. And the ECPM actually is pretty much determined by the CDC and the CTR and that's actually determined by how well we fine-tune the algorithm.

And certainly, we actually spend a lot of other efforts on other things and this improvement on ECPM, actually, we are currently have a plan but that was not our whole focus in the third quarter..

Got you. And then maybe if you could share some because I know the advertising industry in China has been a bit touch and go, I guess, in the last several months in terms of demand and kind of where that's coming from the education [indiscernible].

Can you give us a sense of where you are vertical-wise, kind of what's meaningful right now? And kind of maybe if you could share a little bit of kind of outlook on demand, what you're seeing from them? That would be helpful..

Yes. So actually, recently, a number of Internet platforms, right, they reported earnings.

As we all know, they were expected by macro environment, and the regulation, supervision of key advertisers industries, right, which directly impacted their customer churn, which is what we have seen in the education industry or had the budgets reduced on the client side such as the gaming industry.

However, for JG Alliance, we don't have much coverage in those two industries. Our main customers are mini program advertisers' app retargeting advertisers and advertisers in the field of finance and e-commerce. So customer budgets in those areas are relatively stable.

And so actually, we are not seeing any weakening in terms of the demand from the demand side. So we do not really see the demand will have an impact JG Alliance growth going forward..

Got you. Okay. And so it sounds like churn then, I guess, sounds pretty low. I think you mentioned the last analyst asked about mix between agents and kind of your direct sales.

Any kind of churn I guess color you can share?.

You mean the agents, advertising agents versus direct?.

So yes, you went into that. I think on the last question -- sorry, a question earlier, but in terms of any churn in terms of like the advertisers, I guess, ultimately, you know who's advertising to the platform. Do you see any kind of any changes in overall kind of composition of who's buying ads.

I mean you mentioned kind of many programs in [indiscernible] advertisers..

Yes. So the core, actually, the top advertisers are still the similar -- the same guys, right, and the players basically who are the mini program operators and the players who are for targeting purposes such as companies such as Taobao, Alipay, right, and Maotai and web these customers remain our top customers, and they are very, very stable.

And other than that, actually, we are continuing to penetrate into new industries, such as the -- actually the car industry, okay? So we acquired some customers in that quarter. And also, we continue to leverage our ad agencies.

So if you look at the revenue mix between the other agency and direct sales, actually, actually, last quarter, it was about 50-50.

But this quarter, actually, the ad agency contributed around 55% of the JG Alliance revenues, right, right? So it's actually -- you are seeing the pickup in terms of the revenue mix by the other agencies and these other agencies, they bring in fresh brand new customers to add customers to our platform, which is a good thing.

So I think overall, the customers are stable and we are not seeing any meaningful churn by any large customers..

Our next question is from the line of Brian Kinstlinger of Alliance Global Partners. Please go ahead..

First of all, on the gross margin of 70%, again, you have been quite a bit higher for the last three quarters from there.

Will you see that much pressure over the next few quarters to get you as low as 70%? Or is that -- as the previous gentleman just -- is that just sort of the base pace long term of where you'll be?.

Yes, I think we have been operating the business with margin of 74%, 75%. No, we do not expect the margin to dip in Q4..

Okay. And then....

So Brian, Brian, actually, let me clarify actually, we constantly actually said that we will keep our gross margin above 7%, right? So that's our base case, and above 70%, between 70% and 75%.

Certainly, the USD fluctuation probably between quarter and quarter and -- but that is normal, right? Because some business segments such as the JG Alliance, the margin sometimes is actually decided by how we cook the deal with the app developer the supplier, the traffic the supplier, right? But certainly, we aim to keep the gross margin above 70%.

So that's our goal..

Yes. Okay.

And then as we head into next year, talk about the seasonality and how much of an impact the Chinese New Year has on each of your businesses?.

Yes.

So if you look at our past several years, Chinese New Year seasonality, certainly, the first quarter is the weakest quarter for us, not only for us, actually for the other -- most of the Chinese companies as well first quarter because that's the Chinese New Year and basically, at least the two weeks, nobody is working, right? So basically, nobody is spending money.

So that certainly will impact the demand for JG Alliance business. For the other business because it's subscription-based, right? So it's a highly, highly stable, highly visible.

But that said, overall, for the Company as a whole, you should see certain magnitude of seasonality in the first quarter, i.e., there will be sequential revenue decline by a little bit in the first quarter..

But what you're saying is the SDKs and the vertical applications, both will be a little bit more flat?.

SDK will be okay but vertical application that's one product called Financial Risk Management, Financial Risk Management, actually, our end customer there and demand is consumer-related demand.

So because people will borrow money less, so during that time, actually, if there any consumer demand decreases, their usage to use our service will decrease as well because it's a volume-based pricing model.

So that will be impacted as well, but other than that, our subscription-based business and our -- the industry insights, those business should be stable..

Thank you. There is a follow-question from the line of Ryan Roberts of Navis Capital. Please go ahead..

I had a question actually thinking about like here, and again, I realize you're in the planning process, so on and so forth. Again, but here we are finding ourselves knocking on December door. Looking at the kind of the R&D spend, which has been kind of chunky compared to last year, most of that headcount.

What are you thinking about next year in terms of headcount and kind of expense allocations? I know for this year, things have been kind of tightly controlled, but as you move into next year, what are you thinking about? And maybe what are some of the, I guess, key concerns that you're weighing looking into the year end?.

Yes. So for next year, actually, in terms of the OpEx and also the spending, right, particularly R&D, one thing is clear.

We are not going to try to increase much about the R&D expense, okay? And we are not going to increase much about the R&D head count, okay? And we think there's a lot of room to improve the efficiency, okay, not only by the -- from the human resource perspective, but also from the IT resource perspective and we are currently basically doing the analysis to see where we can improve the efficiency, right? So this improvement needs to happen, okay, next year.

So that will basically we are not -- you will not see much increase in the expense R&D..

Understood. Okay. And maybe if I could turn back to something you mentioned earlier in the call. Sorry, maybe we own. I think maybe I mentioned it.

kind of the Huawei kind of news or maybe some of the investors kind of on the call, that are not super familiar with the landscape of the cloud providers in China and maybe what that actually means transformationally kind of for your company? What that gives you exposure to? Can you maybe talk a bit around kind of what you're thinking about the, I guess, the impact of the Huawei deal? Who that opens your software SDKs and stuff? Who opens you up to in terms of the overall kind of, I guess, a market share perspective? And maybe you could kind of give us some insights on what that could mean for you?.

Yes. So recently, our verification and other customized service will officially launch on HUAWEI CLOUD. So basically, the cooperation with what we call been demonstrated industry wide acute trust, we come out for our robust clinical capability and service.

So basically, developers can -- they can purchase and experience our JVerification phase by looking in their HUAWEI CLOUD account on HUAWEI CLOUD [indiscernible]. So we have the allowance a couple of months. So we already see the few contracts from this alliance.

So next, HUAWEI CLOUD plans to build an asset one-stop integration service platform with us, primarily to package our developer service product into one solution and host on its cloud platform. So these will give developers the ease of wide top purchase experience.

So at the same time, we will provide systematic training for HUAWEI CLOUD sales teams to get a better understanding of our operating regarding this channel, and work closely with them to generate more sales opportunities.

In addition, we will also collaborate with them to -- on marketing activities such as office, apply events targeting the financial industry. Of course, a huge developer group base that we own will also provide a great commercial value for HUAWEI CLOUD itself.

We are also actively discussing how we can embed our cloud service into one -- into our commercial solutions in the new future and promote them to our various cloud base but that's what we see so far. Okay..

[Foreign Language].

I guess not about their manufacturer customers. I know Huawei mobile from back about their HUAWEI CLOUD that's the busiest customer, right? HUAWEI CLOUD is actually growing really, really faster. So it's a similar like [indiscernible]..

Right, right. I just wanted to understand that, again, the difference was like this is to kind of get the HUAWEI CLOUD and infrastructure provider as opposed to any kind of relationship with the Huawei smartphone brand. So it's -- I guess, there's maybe some potential misunderstanding about for HUAWEI CLOUD versus Huawei smartphone and blah, blah..

That's right. We are now collaborating with Huawei smartphone. We are only collaborating with the HUAWEI CLOUD business. Basically, they have the 2B business, right? So, we have the 2B business. So that's a customer synergy..

So basically, I'll give you a number....

HUAWEI CLOUD has around 2,000 sales in the -- I mean, all of the China. We only....

I think they're like number two in China, right, in terms of cloud?.

Currently, it's number two or number three, I'd say, Tencent Cloud or HUAWEI CLOUD. I think HUAWEI CLOUD, yes, yes, yes, that's number two or number three..

[Operator Instructions] I'd now like to hand the conference back to Mr. Rene Vanguesaine for closing remarks. Please go ahead..

Thank you, [Andy]. Thank you, everyone, for joining our call tonight. If you have any further questions and comments, please don't hesitate to reach out to the IR team. This concludes the call. Have a good night. Thank you all..

Thank you, ladies and gentlemen, that concludes the conference for today, and thank you for participating. You now all disconnect..